Legislation Governing Health Plan, Hospital Chain Contracts Introduced in Senate
As expected, Sen. Deirdre Alpert (D-San Diego) on Monday introduced a bill (SB 1509) that would make it illegal for a hospital chain to require a health plan to contract with all of its hospitals, the Sacramento Bee reports. The bill also would require not-for-profit hospitals to submit financial audits to state regulators if the Legislature passes a companion bill (SB 1262) sponsored by Sen. Byron Sher (D-San Jose) and supported by Attorney General Bill Lockyer (D) that would increase regulation of charities (Rapaport, Sacramento Bee, 4/20). Alpert introduced SB 1262 at the request of CalPERS in part because of a disagreement with Sutter Health about the possibility that CalPERS would eliminate coverage for its beneficiaries at some Sutter facilities. Sutter and CalPERS on April 8 signed an agreement that would allow CalPERS to eliminate coverage at some Sutter hospitals or maintain coverage for beneficiaries at all Sutter facilities at a discounted rate. CalPERS officials previously announced that they were pursuing a plan to save $72 million in premiums, including about $53 million in savings by ending coverage for CalPERS beneficiaries at 15 Sutter-owned hospitals. Sutter began negotiating plans to reduce CalPERS' costs, including proposals to allow Blue Shield of California to exclude the 15 Sutter hospitals from an HMO plan for CalPERS members; to include all Sutter facilities in a health plan for CalPERS members if Sutter would discount prices for them; or to create two separate Blue Shield HMOs for CalPERS members -- one that included all Sutter hospitals but would cost more and one that would exclude Sutter and have lower premiums. CalPERS is scheduled to vote Tuesday on its hospital network for next year, including whether to accept Sutter's price cap or eliminate coverage at some Sutter hospitals (California Healthline, 4/19).
Loren Suter, a senior executive for the CalPERS, said, "In our current negotiations, we learned that average prices in the Sutter Health chain are 80% higher than the statewide average. Yet, under existing law, a [not-for-profit] hospital is not required to give us the information to independently justify those higher prices." Gary Loveridge, general counsel for Sutter, said SB 1509 would revise state laws "to give all the contract negotiating power to HMOs and take all power away from hospitals and doctors." Loveridge said, "We believe in financial transparency," but he added that reporting financial transactions between Sutter and its affiliated medical groups, as SB 1509 would require, would be "an incredibly burdensome process" that would not help reduce health care costs. Jan Emerson, spokesperson for the California Healthcare Association, said that SB 1509 could lead to "devastating losses" for hospitals by giving HMOs too much power in negotiating reimbursement rates. She added, "The whole reason hospital chains like Sutter came into existence was to fight back against this alliance between CalPERS and the HMOs that had so many hospitals losing money because they were charging less for care than it actually cost." CHA has not taken an official position on the measure. SB 1509 will be considered by the Senate Insurance Committee Wednesday, and SB 1262 will be heard by the Senate Judiciary Committee Tuesday (Sacramento Bee, 4/20).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.